A new report concludes that the practice among the elderly of transferring assets in order to qualify for Medicaid coverage of nursing home care is uncommon and that efforts to further restrict such transfers will have little effect on Medicaid spending.
The report, by the Georgetown University Long-Term Care Financing Project, comes at a time when the Bush administration and many governors and state legislators are calling for the tightening or elimination of rules that permit asset transfers by the elderly in order to qualify for Medicaid. Proponents of these changes claim that asset transfers are widespread and costly to Medicaid.
But the May 2005 Issue Brief, which reviews empirical evidence on asset transfers, finds no support for such claims. "The argument that something needs to be done about abuses of the Medicaid eligibility rules is not supported by the facts," concludes the paper's author Ellen O'Brien, who is a Research Associate Professor at the Georgetown University Health Policy Institute.
Contrary to critics' portrayal of the elderly as hiring estate planning lawyers to artificially impoverish themselves to qualify for Medicaid, the report finds "little evidence that large numbers of the elderly are planning their estates for the purpose of gaining easy access to Medicaid in the event they need nursing home care."
The report cites one study that found that less than a third of the middle-class elderly gave gifts to children or grandchildren of $500 or more, and that the typical gift was $2,000. The largest transfers were made by those who believed they had a low probability of entering a nursing home in the next five years.
"Audits of Medicaid applications," the paper goes on, "also reveal that only a small fraction of individuals who applied for Medicaid, and an even smaller share of those found eligible for Medicaid, transfer assets for the purpose of qualifying for free care under Medicaid."
Most of the elderly who may require nursing home care have too little wealth to warrant hiring an attorney to arrange an asset transfer, O'Brien says. Most would qualify for Medicaid at admission to a nursing home, although she notes that in part because of an aversion to "welfare," the elderly shoulder more of the costs of nursing home care than they have to.
While acknowledging that "some families try to protect modest assets (and, very infrequently, substantial assets) for future needs or for inheritances," O'Brien found that the overwhelming majority do not.
"The fact is," the report concludes, "that Medicaid is what it was intended to be, a safety net for those who cannot afford to pay for long-term care."
To download a copy of the paper, Medicaid's Coverage of Nursing Home Costs: Asset Shelter for the Wealthy or Essential Safety Net?, in PDF format, click on: https://ltc.georgetown.edu/pdfs/nursinghomecosts.pdf
(If you do not have the free PDF reader installed on your computer, download it here.)